Here we go again!

The office-debt meltdown keeps getting worse. The motto in 2024 was “Survive till 2025” via extend-and-pretend. But now what?

By Wolf Richter for WOLF STREET.

The delinquency rate of office mortgages that have been securitized into commercial mortgage-backed securities (CMBS) spiked to 11.0% in December, a new all-time high, surpassing even the debt-meltdown during the Financial Crisis, when office CMBS delinquency rates peaked at 10.7%, according to data by Trepp today, which tracks and analyzes CMBS.

 

Trade Deficit in Goods Worsens to All-Time Worst in 2024, Small Surplus in Services Rises, Overall Trade Deficit Worsens by 17%

by Wolf Richter • Feb 5, 2025

Three decades of connivance by the US government – which bridged with ease any political divide – and Corporate America, under the failed doctrine of globalization, have destroyed much of the manufacturing base so that corporate profit margins could fatten by chasing cheap labor, lax environmental laws, and preferential treatments in US and foreign tax codes.

In return, they sacrificed the most important economic sector – manufacturing – with its huge primary, secondary, and tertiary impact on employment, on household incomes, on federal, state, and local tax receipts, on knowhow in automation and manufacturing technology, on engineering and engineering education, and on infrastructure. In the process, they shifted much of this activity and expertise to other countries.

The US is still the second largest manufacturing country by output in the world, with a share of 15.9% of global manufacturing output, and larger than the next three combined – Japan 6.5%, Germany 4.8%, and India 2.9%. But China’s manufacturing output is nearly twice that of the US, with a share of 31.6% of global output (World Bank data).

Meanwhile, the globalization-mongers hate tariffs because they’re a tax on the gross profit margins of the importers among Corporate America and hit stocks because passing that cost on to consumers in a competitive market isn’t easily possible. I watched it last time, amazed by the lack of inflation.

DYI:  I’m suspicious of both political parties however I do agree with the tariffs.  They simply don’t go far enough, what is needed IMO, is an across the board 25% tariff on any goods or services coming into the country.  This would have to be as the expression goes “no ifs, ands or buts” mentality.  Then pass investment led spending and most importantly tax incentive for a manufacturing renewal.  The rallying cry would be build baby build alongside drill baby drill!   

 Stock

Valuations

Driven to the Moon!

S&P 500

Shiller PE 38.07

Dividend Yield 1.24

Estimated 10 yr. return

NEGATIVE 1.93%! 

American Empire’s

Economic War

Against

Russia

 &

European Union

European Energy Crisis Worsens as Ukraine Severs Key Natural Gas Route to the European Union

The clear winner of sabotage is the U.S. as it becomes the key supplier of natural gas and LNG to Europe and Ukraine

Lena Petrova

Dec 29, 2024

The decision not to extend the contract is clearly against the best interest of Ukraine. At the same time, it serves the United States and its ambitions to sell more of its energy resources to the EU, therefore making Europeans even more dependent and ultimately subservient to its interests. Ukraine stands to lose fees equivalent to about 0.5 percent of its GDP from ending the transit contract and - perhaps even more importantly - the decision of Zelensky’s government undermines Ukraine’s strategic role as an energy partner for Europe.

DYI COMMENT:  There will be no oil and gas partnership between Russia and the countries making up the European Union (EU).  Simply put the U.S. will NOT ALLOW any regional hegemon from developing as Russia provided inexpensive gas and petrol products to Central Europe with Germany supplying technical assistance/investment to revitalize Russia's ageing manufacturing center.  If allowed to be completed a shared regional power between Moscow, Berlin and Paris would have evolved with a combined economy and population base greater than the U.S.    

Washington Air Crash Hoax: 

Trump Fakery On Speed

You have to hand it to the Crisis-Actor-In-Chief for keeping a straight face when they rolled out his first big psyop in office. It's one of their worst yet!

Gemma O’Doherty Feb 1 The Washington plane crash hoax of Wednesday takes some beating when it comes to in-your-face fakery. They know the lobotomized masses will swallow any old tripe at this stage so they don’t even try to make their psyops remotely credible any more. They’re pretty much showing them it’s theatre to test levels of stupidity in the herd, but no, the lemmings still buy it because they saw it on TV. As always with these staged MCIs, we’re expected to abandon all reason, logic and common sense, and believe an absurd media narrative involving a mind-bending script and hired performers who can never conceal their duping delight.  Can’t they find any crisis actors  who don’t start smiling mid fake cry? As if a military helicopter would be allowed to perform a training exercise smack in the middle of a restricted flight landing path at one of the busiest airports in the world.  Oh yeah, like that’s really going to happen. And no matter how many trannies or lezzers might be manning Air Traffic Control (ATC) or a cockpit of a modern aircraft at any given time,  mid-air collisions are virtually impossible nowadays because early warning systems simply do not permit them, unless all of those on duty are in a comatose state.  Aircraft flying below 29,000 feet have to maintain a separation of at least 1,000 feet. In order to swallow this farcical tale, we’re expected to believe that the pilots in the cockpits of both planes simply ignored their aircrafts’ anti-collision warning systems and that ATC were all off duty as well.  That’s three separate cohorts of highly skilled aviation professionals dozing off at the same time - two of them willing to plunge themselves into the depths of the Potomac River with their passengers, and those on the ground prepared to lose their jobs and face possible criminal charges. They’re laughing at the useless goy. What you actually saw was a flash of light in the sky made in a Hollywood studio a la 9/11/Sandy Hook/Manchester/Christchurch and on and on and on. You can always smell a TV hoax when the media come out with way too much detail in the immediate aftermath such as video footage from some randomer and dry-eyed vicsim families telling nauseating scripted stories about how ‘amazing’ their loved ones were: have you ever noticed that the RIPs are always the most incredible people in the world? Funny that. And whenever you see Z-list sports actors with crazy names (in this case from the seedy world of figure skating) along with ex-military taking part in a disaster event, it’s another dead giveaway. With all of these psyops, the agenda is always central. And quite a few boxes were ticked with this one.  Firstly, the global tyrants are determined to stop the masses flying so they’ve been rolling out lots of terrifying fake crashes like this to put them off ever boarding a plane again.  The scarier the better and there’s nothing like a night-time plunge into freezing water to put the fear into the sheep.  An added bonus with these dramatized TV events is they put eyes on mainstream media giving them a badly needed boost in audiences. Then there’s the DEI box ticked: Trump is going to fire all the queers and illegals from aviation. And put the blame on Biden and Obama of course (snore.) Trump Cult screams with joy. Ha! Another stake in the hearts of the leftards. Because that’s all that matters, isn’t it? Keep the division going. So juvenile. So predictable. So boring. And Trump’s AI surveillance grid (see Day 1 in Office) will soon be taking over aviation as well as every other sector as he underlined in his post-hoax speech where he implied humans are simply not up to the job of controlling air traffic any more.  As mass tourism is phased out to save the climate, airport staff will be too: just look at the number of facial recognition systems being installed in European airports replacing officers at passport control. In my latest stream, I debunk the comedy crash with Phil Crane. You can watch back here: https://gemmaodoherty.com/friday-night-live-dc-crash-hoax-debunked-and-latest-trump-fakery-with-phil-crane/ In these times, you need to operate on the basis that any viral media event is fake and driven by an agenda:  Problem, Reaction, Solution. Become an auto-hoaxer and they won’t fool you for long. Thank You Gemma!

Despite the Fireworks in High Tech No Change from Last Month!

 

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 2/1/25

Active Allocation Bands (excluding cash) 0% to 50%

30% - Cash -Short Term Bond Index - VBIRX

45% -Gold- Global Capital Cycles Fund - VGPMX **

 25% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

** Vanguard's Global Capital Cycles Fund maintains 25%+ in precious metal equities the remainder are domestic or international companies they believe will perform well during times of world wide stress or economic declines.  

Margin of Safety!

Central Concept of Investment for the purchase of Common Stocks.

"The danger to investors lies in concentrating their purchases in the upper levels of the market..."

Stocks compared to bonds:

Earnings Yield Coverage Ratio - [EYC Ratio]

Lump Sum any amount greater than yearly salary.

PE10  .........38.07
Bond Rate...5.35%

EYC Ratio = 1/PE10 x 100 x 1.1 / Bond Rate

2.00+ Stocks on the give-away-table!

1.75+ Safe for large lump sums & DCA

1.30+ Safe for DCA

1.29 or less: Mid-Point - Hold stocks and purchase bonds.

1.00 or less: Sell stocks - Purchase Bonds

0.50 or less:  Stock Market Crash Alert!  

Purchase 30 year Treasury Bonds! 

Current EYC Ratio: 0.54(rounded)

As of  2-1-25
Updated Monthly

PE10 as report by Multpl.com

Bond Rate is the rate as reported by

Vanguard Long-Term Investment-Grade Fund Investor Shares (VWESX)

DCA is Dollar Cost Averaging.

Lump Sum is any dollar amount greater than one year salary.

Over a ten-year period the typical excess of stock earnings power over bond interest may aggregate 4/3 of the price paid. This figure is sufficient to provide a very real margin of safety--which, under favorable conditions, will prevent or minimize a loss...If the purchases are made at the average level of the market over a span of years, the prices paid should carry with them assurance of an adequate margin of safety.  The danger to investors lies in concentrating their purchases in the upper levels of the market.....

Common Sense Investing:
The Papers of Benjamin Graham
Benjamin Graham

%
Stocks & Bonds

Allocation Formula

2-1-2025
Updated Monthly

% Allocation = 100 x (Current PE10 – Avg. PE10 / 4)  /  (Avg.PE10 x 2 – Avg. PE10 / 2)]

Formula's answer determines bond allocation.

Current PE10.....38.07

Avg. PE10...........17.20

Core Bond Allocation:  131% 

% Stock Allocation     0% (rounded)
% Bond Allocation  100% (rounded)

Current Asset: 

Vanguard Long-Term Investment Grade Bond 

Fund   

Logic behind this approach:

--As the stock market becomes more expensive, a conservative investor's stock allocation should go down. The rationale recognizes the reduced expected future returns for stocks, and the increasing risk. 

--The formula acknowledges the increased likelihood of the market falling from current levels based on historical valuation levels and regression to the mean, rather than from volatility. Many agree this is the key to value investing.  

Please note there is controversy regarding the divisor (Avg. PE10).  The average since 1881 as reported by Multpl.com is 16.70.  However, Larry Swedroe and others believe that using a revised Shiller P/E mean of 19.6 , the number since 1960 ( a 53-year period), reflects more modern accounting procedures.

DYI adheres to the long view where over time the legacy (prior 1959) values will be absorbed into the average.  Also it can be said with just as much vigor the last 25 years corporate America has been noted for accounting irregularities.  So....If you use the higher or lower number, or average them, you'll be within the guide posts of value.

Please note:  I changed the formula when the Shiller PE10 is trading at it's mean - stocks and bonds will be at 50% - 50% representing Ben Graham's Defensive investor starting point; only deviating from that norm as valuations rise or fall.

Current Allocation:

Vanguard Long Term Investment Grade Bond Fund

Possible Allocations to Bonds vs Stocks:

Bonds %

100%+  Vanguard Long Term Investment Grade Bond Fund 

99% to 65% Wellesley Income Fund

64% to 35% 1/2 Wellesley Income Fund - 1/2 Wellington Fund

34% to 0%  Equity Income Fund

  

DYI

This blog site is not a registered financial advisor, broker or securities dealer and The Dividend Yield Investor is not responsible for what you do with your money.

This site strives for the highest standards of accuracy; however ERRORS AND OMISSIONS ARE ACCEPTED!

The Dividend Yield Investor is a blog site for entertainment and educational purposes ONLY.

The Dividend Yield Investor shall not be held liable for any loss and/or damages from the information herein.

Use this site at your own risk.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

The Formula.

A value based allocation strategy

February 19, 2010 by John Kingham

The Medical Industrial Complex is Ramping Up the Fear Campaign AGAIN!

 VIDEO

Dr Sam White on the Medical Mafia

Dr Sam Bailey Oct 8 Dr Sam White had been a General Practitioner in the United Kingdom for over a decade when the COVID-19 show was launched in 2020. His refusal to participate in rituals such as face masking soon attracted the attention of unquestioning colleagues and then the medical “authorities”. Not deterred, in early 2021 he recorded a video that went “viral” with millions of views as he exposed the vaccine rollout scam. Like me, Sam renounced his medical license and in parallel with my experience, the General Medical Council kept him on the medical register in order to stage a kangaroo court. Again like me, Sam had no interest in participating in such a ridiculous spectacle. A few weeks ago he was ‘struck off’ so I caught up with him to find out what happened and why we are both a major problem for the controlled and dangerous medical establishment. Dr. Sam (UK version) also explained how a personal health crisis led him to move away from allopathic medicine and into a more holistic approach through functional medicine. This included waking up to the widespread perversions of the pharmaceutical industry and becoming an evidence-based “anti-vaxxer”. Despite the gravity of the current situation, he retains a sharp sense of humor. Additionally, this unshakeable and authentic physician continues to show what must be done to end systemic corruption.

 

$101,915

Average American Debt Level!

DYI:

If you find yourself in a Financial Hole

Stop Digging!

The current personal debt crisis in the United States is concerning. As of 2024, the average American carries approximately $101,915 in total personal debt, which includes liabilities such as credit cards, student loans, and auto loans​. Recent data indicates that about 36% of Americans have increased their debt in the past few months, with 34% reporting that they carry over $10,000 in consumer debt​. With rising costs and economic uncertainty, nearly half of adults have struggled to make timely bill payments, and a significant portion anticipates using credit cards for essential purchases, especially during the holiday season​.

Credit card debt, in particular, has become a significant concern. The average American now carries around $6,271 in credit card debt, a figure that has been steadily rising as consumers increasingly rely on credit to manage everyday expenses. The Federal Reserve reported that total credit card debt reached $1.03 trillion, the highest level on record​. This surge in credit card debt can be attributed to a combination of factors, including inflationary pressures and the rising cost of living, which push consumers to borrow more just to keep up with basic needs. Consequently, many find themselves trapped in a cycle of high-interest repayments, making it increasingly difficult to achieve financial stability​. 

The following are the common types of personal debts:

1. Mortgage Loans

• Yield Range: 2-7% annually
• Features:
  • Mortgages tend to have the lowest interest rates among personal loans, especially with a fixed-rate, 30-year term.
  • Interest may be tax-deductible.  DYI:  More than just a rule of thumb; a lifesaver making a house a blessing instead of a curse, 15 year mortgage, loan amount no more than 2x gross income**, and pay down as many points as the mortgage company will allow.  **Soon to be millionaires always shoot for 1.5x times income and yes you will have to save up for the down payment to achieve this criterion.

2. Credit Card Debt

• Yield Range: 15-25% annually
• Features:
  • Credit card debt has one of the highest interest rates, quickly accumulating if not paid off monthly.  DYI:  If you always find yourself running balances (hence being charged close to loan shark rates) switch to only using your debit card or go old school using cash!

3. Car Loans

• Yield Range: 4-10% annually
• Features:
  • These loans usually come with fixed rates over a term of 3-7 years.
  • Cars depreciate quickly, which makes financing them costly in the long run. DYI: Buy used cars in cash and save yourself huge dollars.

4. Student Loans

• Yield Range: 4-8% annually
• Features:
  • These loans often come with favorable repayment terms, including deferment and income-based repayment options.  DYI:  Depending on the amount - if relatively small make a rapid payoff - if large then structure your repayment over a 5 to 10 year time frame.  Many doctors take 15 years to retire the debt due to insane educational costs. 

5. 401(k) Loans

• Yield Range: Prime rate + 1% to 2% (e.g., if the prime rate is 7.5%, the loan's interest rate will be 8.5% to 9.5%).
• Features:
  • Repayments consist of principal and interest, typically made monthly or bi-weekly via payroll deductions.
  • Interest repaid goes back into your 401(k), effectively "paying yourself."
  • No credit checks or third-party lender involvement.
  • Reduces the growth potential of your retirement savings during the loan period.
  • Leaving your job could require repaying the balance as a lump sum, typically within 60 to 90 days. Failure to do so may result in taxes and penalties.
  • Best used as a last resort to avoid jeopardizing long-term retirement goals.  DYI:  Borrowing money out of your 401k is a dead last resort - never your go to source of money this is for retirement when your working years have ended!

6. Other Personal Loans

• Yield Range: 6-15% annually
• Features:
  • These loans tend to have higher interest rates than secured loans like mortgages but lower than credit card debt.

Smart rules of thumb to manage these various types of debts:

• Pay Off High-Interest Loans First

  • Example: It's a no-brainer to first manage your credit card debt that obviously has the highest interest rate! If you have a credit card debt with a 20% APR and a car loan with a 6% interest rate, prioritize paying off the credit card to save on interest costs.

• Consider Loan Advantages

  • Example: A 401(k) loan allows you to repay yourself with interest, which can be more advantageous than taking out a personal loan with higher interest rates. Similarly, some mortgages or student loans offer tax benefits worth retaining.

• Refinance to Lower Interest Rates

  • Example 1: Switch your credit card debt to another credit card debt that has lower interest rate or borrow from your 401(k) to pay off the highest interest rate credit card debt if necessary!
  • Example 2: If you're repaying a 10% personal loan, consider consolidating it into a 6% home equity loan to lower your interest expenses.

Growth Stocks

VS

Value Stocks

Current underperformer: Value

DYI:  Here is a method for those who have high tolerance for a portfolio 100% invested at all times.  For those who are young enough with at least 2 decades and 3 is preferred; who are obviously in the accumulation stage of life.

Two Vanguard Funds:

1.) Growth Index Fund

2.) Value Index Fund

The accumulation of savings is the fund that is UNDERPERFORMING!   When your underperforming fund becomes the new winner you now direct your savings into the old winner neither fund is ever sold.  That’s it!

Whether or not this method will outperform the S&P 500 index is unknown, however it does make common sense buying the bargain as compared between the two funds – growth vs value.  

10 year estimated average annual return NEGATIVE 2%!

 

Only after the speculative collapse

does the truth emerge.

There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present. Only after the speculative collapse does the truth emerge.

-John Kenneth Galbraith, A Short History of Financial Euphoria, 1990

On Friday December 6th, the U.S. stock market pushed to the most extreme level of valuation in U.S. history, based on the measures that we find best-correlated with actual subsequent 10-12 year S&P 500 total returns, as well as the depth of subsequent losses over the completion of market cycles across a century of data. That’s not a forecast. Rather, it’s a statement about current, measurable, observable market conditions.

John P. Hussman, Ph.D.

14th Amendment to the U.S. Constitution: 

Civil Rights (1868)

AMENDMENT XIV

Section 1.

All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

Section 2.

Representatives shall be apportioned among the several States according to their respective numbers, counting the whole number of persons in each State, excluding Indians not taxed. But when the right to vote at any election for the choice of electors for President and Vice-President of the United States, Representatives in Congress, the Executive and Judicial officers of a State, or the members of the Legislature thereof, is denied to any of the male inhabitants of such State, being twenty-one years of age, and citizens of the United States, or in any way abridged, except for participation in rebellion, or other crime, the basis of representation therein shall be reduced in the proportion which the number of such male citizens shall bear to the whole number of male citizens twenty-one years of age in such State.

Section 3.

No person shall be a Senator or Representative in Congress, or elector of President and Vice-President, or hold any office, civil or military, under the United States, or under any State, who, having previously taken an oath, as a member of Congress, or as an officer of the United States, or as a member of any State legislature, or as an executive or judicial officer of any State, to support the Constitution of the United States, shall have engaged in insurrection or rebellion against the same, or given aid or comfort to the enemies thereof. But Congress may by a vote of two-thirds of each House, remove such disability.

Section 4.

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Section 5.

The Congress shall have power to enforce, by appropriate legislation, the provisions of this article.

 

Vanguard Mutual Funds Founder

The Late Jack Bogle’s 10 Investment Principals

With DYI’s Commentary

1.)  Reversion to the mean

Over time, the market will return to its average, so it's not a good idea to pick funds based on yesterday's winners.

DYI:  Chasing the latest hot performing fund is prescription for long term poor performance as what invariably occurs a misstep will happen driving down the return back to the long term average of the market in general (and possibly worse).   

2.)  Time is your friend

Start investing early, stick to a plan, and don't pay attention to daily market news.

DYI:  I actually advocate young people to save as much money for retirement to the exclusion of purchasing their first house.  Why?  Time is your friend when you are young and your enemy when you have passed the 40 year old mark.  Simply more time to compound and more you are able to put in early will help tremendously before all the costs of household formation comes into play.

3.)  Buy right and hold tight

Once you've set your asset allocation, don't change it based on market fluctuations.

DYI:  John Bogle does mention in his book – Bogle on Mutual Funds 1994 – Chapter Twelve – The Allocation of Investment Assets beginning page 235 – changing your allocation between stocks to bond ratio.  His determination for any change is based upon – drum roll please – VALUATIONS!

See DYI's Benjamin Graham Corner

 https://dividendyieldinvestor.blogspot.com/p/ben-ii.html 

4.)  Realistic expectations

Returns in the coming decade are likely to be lower than in the past.

DYI:  Once again – as of 12-9-2024 – the U.S. Stock Market is so severely “jacked up” returns going forward over the next 10 years will be sub atomically low (less than the rate of inflation) or outright losses depending on your allocation.   

5.)  Buy the haystack

Instead of buying individual stocks or stock funds, invest in broad-based index or exchange-traded funds to reduce risk.

DYI:  I don’t see the need for any more than three funds at the maximum nor is it required.  If a very conservative investor or due to insanely high valuation the Vanguard’s Wellesley Income Fund – (35% stocks – 65% bonds) – will do just fine.   

6.)  Minimize fees

Invest in low-cost, low-turnover funds to increase your return.

DYI:  After looking at 401k plans till I’m blue in the face I’ve come to the conclusion the best thing to do is only the match after that set up with Vanguard an automatic method of investing.  Why?  The vast majority of these corporate plans have 2% expense ratio as compared to Vanguard’s S&P 500 index fund at 0.04%!  That is a 98% decline in costs to run the fund!  Vanguard’s Wellesley Income Fund (non-index)** expense ratio is 0.16%!    

7.)  Risk is unavoidable

There's no wealth without risk, so you should save and invest for retirement to avoid depleting your savings with inflation.

DYI:  Inflation is the biggest tax that you will pay even beyond death.  Funeral costs have soared right in line with inflation! 

8.)  Don't fight the last war

Avoid the temptation to sell when markets fall and buy when they rise based on your emotions.

DYI:  Individuals who are very risk adverse then the Wellesley Income Fund is their only fund of choice no matter what the current valuation level is.  If it is this fund as compared to doing nothing at all the choice is obvious.  

9.)  Skepticism towards active management

Bogle was skeptical of active management strategies, which often promise high returns based on the manager's skill.

DYI:  Over broad periods of time measured in decades your asset allocation – stocks, bonds, or gold/silver if invested based upon correct use of valuation will out perform any hot manager past or present (except for late Benjamin Graham or Warren Buffett).     

10.)  Simple, cost-efficient, and diversified

Bogle advocated for an investment approach that mirrors the market's returns over the long term.

**After studying Vanguard’s actively managed funds they are closet indexers who make buy and sell decisions only on the margins attempting to add value to the overall portfolio.  Even with that their portfolio turnover is SIGNIFICANTLY lower as compared to their peers.  In other words the portfolio changes when their core positions (closet indexer) rise or decline significantly thus increasing or decreasing but never abandoning the stock.